Reliance Top 200: HOLD

Reliance Top 200 is a fund that predominantly focuses on large-caps and has delivered 18 per cent returns over the last five years. The scheme is placed among the mid-quartile of diversified funds across one-, three- and five-year timeframes.

Existing investors can continue to hold on to the units, as the fund’s current stock and sector choices seem promising. But fresh exposures need not be considered right now as funds such as ICICI Top 200 and HDFC Top 200 have put up a much better show with 20-22 per cent returns over the past five years.

During market downturns, the fund has contained losses better than BSE 200. One reason could be its focus on large-cap stocks, which create a safety net during troubled times.

Some well-timed sector moves have also helped it tide over turbulence. For instance, in 2011, it gradually reduced holdings in the banking space that took the heat and instead found refuge in consumer non-durables, a pick that reasonably defended it from the fall.

But the performance of Reliance Top 200 during rallies has been mixed, with only the mid-cap-led rally in 2012 helping its case convincingly.

Exposure to mid-cap stocks was deftly raised to benefit from the rally. From less than 10 per cent, mid-caps moved to occupy 18 per cent of the fund’s portfolio during this period.

Winning stock picks in this segment included Hathway Cable & Datacom, Max India and Shopper’s Stop.

Although the fund shows some sparks of brilliance, the mixed record so far pulls it down when checked for consistency of returns. Overall, in the last five years, Reliance Top 200 has outdone its benchmark only 63 per cent of the time on a rolling basis. That said, the current portfolio shows some promise, giving existing investors a chance to hope for better returns.

While petroleum products, banks and software have always been among the top sector picks, the fund has rightly increased holdings in the software space from mid-2013 onwards, choosing large-caps such HCL, Wipro and TCS.

At the same time, it has found value in cyclicals such as auto, picking up stocks such as Bharat Forge, Tata Motors, Eicher Motors and Cummins India. Bottom fishing of names from among PSU banks and capital goods players is also evident.

The motley mix of value, growth, cyclical and defensive stocks could stand the fund in good stead in the next few months, on the back of the anticipated recovery in the economy.

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